Cancer spending and accountable care organizations: Evidence from the Physician Group Practice Demonstration

BackgroundAlthough accountable care organizations (ACOs) are rapidly being deployed in Medicare, little is known about how the model might affect high-risk, high cost groups such as cancer patients. The Physician Group Practice Demonstration, which ran from 2005 to 2010 in 10 physician groups, provides the best current evidence on the likely effectiveness of accountable care organizations for Medicare beneficiaries. Changes in cancer treatment and spending under this program may be indicative of cancer treatment under ACO payment reform.MethodsUsing Medicare fee-for-service claims data, regression analysis was used to estimate changes in payments for cancer patients using a difference-in-difference design comparing pre- (2001–2004) and post-intervention (2005–2009) trends in spending on cancer patients in PGPD participants to local control groups.ResultsRegression models indicate the Physician Group Practice Demonstration was associated with average Medicare spending reductions per cancer patient of $721 annually across participating sites, an annual 3.9% reduction in payments per patient. Savings derived entirely from reductions in acute care payments for inpatient stays. The Demonstration was also associated with a reduction in mortality among cancer patients. There was no significant change in the proportion of deaths occurring in the hospital. There were significant reductions in hospice use, hospital discharges and ICU days, but no reductions in cancer-specific procedures or chemotherapy. Estimates of all measures varied considerably across participating sites.ConclusionsThe Physician Group Practice Demonstration was associated with reductions in admissions for inpatient care among beneficiaries with prevalent cancer, with no adverse effect on mortality. Participants in the Physician Group Practice Demonstration did not change the trajectory of spending for cancer-specific treatments.ImplicationsInpatient care for beneficiaries with cancer may represent a significant source of potential savings for ACOs, but evidence from the Physician Group Practice Demonstration indicates that no changes were made to cancer treatments such as chemotherapy or surgical procedures.